Portugal 2030: Structural deficits, major risks and paradigm shifts

We have to bring the future to the present, make its way every day, otherwise we have no future

We deal badly with the future and its projections or anticipations. In this decade, structural deficits, major risks and paradigm shifts converge. It's no small thing.

This means that we have to bring the future into the present, make its way every day, otherwise we have no future. Let's start with the structural deficits of Portuguese society.

The structural deficits of Portuguese society

Beyond the enunciation of several transition plans – the PRR and the PT 2030 – our administration's policy does not assure us that the structural deficits of Portuguese society that we have allowed to accumulate in the last 20 years will be resolved or mitigated, namely:

– The near stagnation of the productivity-competitiveness binomial (which impoverishes a good part of those who work),

– The vicious circle of low qualifications, low incomes, high social inequality and poverty (which increasingly polarizes Portuguese society),

– The contextual costs and distortions of tax expenditure and tax benefits; decarbonization and digitization require a change in the structure of these benefits;

– The irrelevance of the capital market for the purpose of capitalization, resizing and innovation of SMEs; this fact throws SMEs into the hands of the banking system, which are now added to the moratoriums caused by the pandemic;

– The reduced integration and specialization of our value chains and respective internationalization (exports in excess of 43% of GDP today);

– The absence of a consistent reform plan for public and private debt (which could strangle us until the end of the decade, with more TAP and NB in ​​the mix);

– Regulatory and regulatory excesses around the administration of justice, taxation, licensing, environmental opinions, which bureaucratize the public administration and reduce the incentive for FDI;

– The profound transformation of the socio-labour market requires a revolution in the professional training of workers, in the work of higher education institutions, in the cohesion of the social market economy and in the welfare policy of the XNUMXst century welfare state;

– The asymmetric effects of the great transitions – decarbonization, digitization, automation – of this decade demand more equity and effectiveness of territorial cohesion policies to prevent new migratory flows to the coast and abroad.

In other words, thirty-five years after joining the EEC, the country is clearly better off, but an important part of the Portuguese will continue to struggle not to become more impoverished.

The great risks of Portuguese society

Secondly, we need to prevent and anticipate major risks, as they can cause us profound damage and prevent the resolution of structural deficits. On April 25, 2024, Portuguese democracy will celebrate half a century of existence.

On that date, it is very likely that the global and European framework and some of its red lines will be red hot, for example: the effects of the climate crisis, viral and pandemic threats, the permanent risk of a nuclear crisis, the ever-imminent terrorist danger, computer risk and cyber warfare, the populist threat and illiberal regression, geopolitical tensions with China and Russia, the health of the global economy and multilateralism, the lack of confidence in the European project. Beyond these red lines, there are some risks closer to us that can affect us more directly.

1 – Climate change, devastating impacts

The episodes are more and more frequent, more distributed and more violent and the latest experts' reports show us dates and deadlines that are closer and closer to us.

2 – Mediterranean, failed states and refugee crisis

Ten years have passed since the Arab Spring and the events speak for themselves, we are facing failed states, increasingly radicalized and with increasingly intense refugee flows close to us.

3 – Spain, a serious internal political crisis

A serious internal political crisis, for reasons related to independence regionalism and its association with the crisis of the monarchy, could erupt at any time. Such a powerful and unstable neighbor is not good news, especially if we add the problems relating to nuclear power plants close to the borders and the management of water in the peninsula's international rivers.

4 – Portuguese diaspora, a crisis on the horizon

There is no good news from the Portuguese diaspora, just think of Venezuela, South Africa, Angola, Mozambique or Brazil, to name only the most critical. If we add climatic and pandemic episodes to the political, economic and social crisis, the conditions for a serious crisis are in the near future.

5 – European Union, a serious crisis of confidence

The European Union has shown itself, once again, to be a fundamental political organization in preventing and combating major risks. For this reason, any break or malfunction in your activity can be bad news for all Europeans.
In addition to global public goods, the European Union must be very attentive to social inequalities and social polarization, which are what lead to European radicalism, populism and nationalism and to a serious crisis of confidence.

Portugal 2030, paradigm shifts

Thirdly, and simultaneously with the deficits and risks mentioned, we will have the paradigm shifts that will change the global geoeconomy (the hegemony of the Indo-Pacific zone), the relative position of countries, economic actors, their regions and the well-being of their populations.

1 – The European Ecological Pact and the New Energy Matrix

From the Paris Agreement (2015) to the European Ecological Pact and the European Climate Law (2021), the aim is to achieve carbon neutrality by 2050 and a 55% reduction in emissions by 2030.
Decarbonization and the new energy matrix will very asymmetrically alter the various national and regional economies, which is why a fair transition fund was created for this purpose.
The new productive arrangements will be more complex.

2 – The great digital transformation and the reorganization of the labor market

The ongoing technological and digital transformation has a very uneven impact on national and regional economies and their respective labor markets. On the other hand, reducing the ecological and energy footprint forces us to review many value chains and some of them will even be deglobalized and relocated. The relationship between digital transformation and the labor market is, therefore, very variable in its national and regional consequences.

3- The migratory pact, the European social pillar and the reform of the State and Administration

Climate and energy change and digital transformation have devastating consequences on the most fragile countries and economies, the effects, moreover, of which are clearly visible today.
Erratic migrations, refugee flows, the growing number of failed states, refugee camps as an element of regional geopolitics, all these factors test the European Union's political resilience and its capacity to strengthen the European social pillar and approve an even more ambitious migration pact. An immediate consequence is the impact of these reforms on the strength of the welfare state and the more general reform of the administration state.

Final Notes

I confess that I cannot envision the fight against structural deficits, global risks and paradigm shifts without the provision of more European common goods and, therefore, without the deepening of the economic and monetary union (EMU), fiscal and budgetary union (UFO) ) and the European Political Union (UPE), whose level of federal political demand calls for and justifies, at home, a political front with the same level of demand and ambition, to be put into practice as quickly as possible.

Thus, in the time horizon of the recovery and resilience program (PRR, 2026) and PT 2030, the following categorical imperative becomes necessary and urgent: a historic inter-party commitment in the horizon 2024, a review of the European treaties within the framework of EMU II and of the UPE, a program of State reforms for two legislatures and, finally, but simultaneously, a program of structural reforms for economic and social development, to be carried out until 2030.


Author António Covas is a Retired Full Professor at the University of Algarve